Finance Industry Has Pried into Every Sector of the Economy, and Has Ended Up Running the Whole Show

Naked Capitalism / By Michael Hudson

The Finance Industry Has Pried into Every Sector of the Economy, and Has Ended Up Running the Whole Show
Finance has moved to capture the economy at large, industry and mining, public infrastructure, and now even the educational system.

December 31, 2012 |

Today’s economic warfare is not the kind waged a century ago between labor and its industrial employers. Finance has moved to capture the economy at large, industry and mining, public infrastructure (via privatization) and now even the educational system. (At over $1 trillion, U.S. student loan debt came to exceed credit-card debt in 2012.) The weapon in this financial warfare is no larger military force. The tactic is to load economies (governments, companies and families) with debt, siphon off their income as debt service and then foreclose when debtors lack the means to pay. Indebting government gives creditors a lever to pry away land, public infrastructure and other property in the public domain. Indebting companies enables creditors to seize employee pension savings. And indebting labor means that it no longer is necessary to hire strikebreakers to attack union organizers and strikers.

Workers have become so deeply indebted on their home mortgages, credit cards and other bank debt that they fear to strike or even to complain about working conditions. Losing work means missing payments on their monthly bills, enabling banks to jack up interest rates to levels that used to be deemed usurious. So debt peonage and unemployment loom on top of the wage slavery that was the main focus of class warfare a century ago. And to cap matters, credit-card bank lobbyists have rewritten the bankruptcy laws to curtail debtor rights, and the referees appointed to adjudicate disputes brought by debtors and consumers are subject to veto from the banks and businesses that are mainly responsible for inflicting injury.

The aim of financial warfare is not merely to acquire land, natural resources and key infrastructure rents as in military warfare; it is to centralize creditor control over society. In contrast to the promise of democratic reform nurturing a middle class a century ago, we are witnessing a regression to a world of special privilege in which one must inherit wealth in order to avoid debt and job dependency.

The emerging financial oligarchy seeks to shift taxes off banks and their major customers (real estate, natural resources and monopolies) onto labor. Given the need to win voter acquiescence, this aim is best achieved by rolling back everyone’s taxes. The easiest way to do this is to shrink government spending, headed by Social Security, Medicare and Medicaid. Yet these are the programs that enjoy the strongest voter support. This fact has inspired what may be called the Big Lie of our epoch: the pretense that governments can only create money to pay the financial sector, and that the beneficiaries of social programs should be entirely responsible for paying for Social Security, Medicare and Medicaid, not the wealthy. This Big Lie is used to reverse the concept of progressive taxation, turning the tax system into a ploy of the financial sector to levy tribute on the economy at large. ..................(more)

6. The insidious plan set into motion many years ago is coming to fruition. n/t

7. We are all indentured servants.

Elizabeth Warren understands those issues, she understands the practices that have gone on like nobody else and she can really play an enormously influential role in the Senate in correcting the abuses that have worked to turn to so many American essentially into indentured servants for the banks.”

12. ^ This is probably the least surprising response in the thread.

11. K&R This is exactly what those that opposed what was done at the beginning of the 20th century

warned would happen. It has happened piece by piece, industry by industry, over the course of this last century.

And still, very few of us see what has happened, and even fewer are willing to make to changes that are required to change it.

Certainly our political leaders are never going to propose anything like the steps needed to reverse this process. Nobody that makes their living by stealing the productivity of others wants to change it. Even those that are the most victimized by it are largely unaware of how their efforts are stolen every day by parasites that reap the rewards of their work.

14. yeah the FIRE sector has their blood funnel into everything including non-profits... Kick-n-Rec

"The World is dividing into two blocs – the Plutonomy and the rest. The U.S., UK, and Canada are the key Plutonomies – economies powered by the wealthy. Continental Europe (ex-Italy) and Japan are in the egalitarian bloc.

Equity risk premium embedded in “global imbalances” are unwarranted. In plutonomies the rich absorb a disproportionate chunk of the economy and have a massive impact on reported aggregate numbers like savings rates, current account deficits, consumption levels, etc. This imbalance in inequality expresses itself in the standard scary “global imbalances”. We worry less.

There is no “average consumer” in a Plutonomy. Consensus analyses focusing on the “average” consumer are flawed from the start.

We project that the plutonomies (the U.S., UK, and Canada) will likely see even more income inequality, disproportionately feeding off a further rise in the profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization."